Más contenido relacionado La actualidad más candente (19) Similar a NAPM AZ Presentation 25 Aug 2011 (20) NAPM AZ Presentation 25 Aug 20111. Supply Management: The Missing
Voice in the Integrated Business Plan
How Cost Management, Negotiation and Contract Management
Inform the Process and are Essential to Its Execution
Arnold Mark Wells, CPIM
25 August 2011
2. How can we align and integrate decisions
toward a common goal?
?
Business decisions from various functions are often not aligned. Yet unless we
can align them, moving the business forward is difficult.
© 2011 End-to-End Analytics, LLC 2
3. Myopic, incomplete perspectives will not yield
integrated business planning
When decision-makers
are looking at different
decision variables, but
not the whole equation,
they are forced to make
assumptions.
© 2011 End-to-End Analytics, LLC 3
4. The Dangers of Dis-integrated Decisions
“When I was a physicist, someone would come to me from time to time
with problems in mathematics he could not solve. He wanted me to
check his numbers for him. But after a while I learned not to waste my
time checking the numbers, because the numbers were almost always
right. However, if I checked the assumptions, they were almost always
wrong.”
The Goal by Eli Goldratt
So, while a single business function makes a “good”
decision based on a subset of inputs, their “numbers”
may be right, but the explicit or implicit assumptions
about other business functions may render the
functional decision a poor one for the company overall.
© 2011 End-to-End Analytics, LLC 4
5. “Little” Sales and Operations Planning
S&OP started as a tactical effort to line up production, sales and
inventory.
Other business functions
Inventory need to be included for
decisions that are
integrated and strategic.
Sales Production
? ?
?
• e.g. PSI Report
• The focus was tactical so the terms were common
• But it was only part of the picture from a strategic point of view
© 2011 End-to-End Analytics, LLC 5
6. “Big” S&OP Process
S&OP has evolved into an holistic strategic process
1. Strategic Planning
Rationalize Products, Channels, Customers
New Product Planning
Align Pricing 2. Demand Planning
Alignment to Corporate Goals Quantitative Forecasting
Supply Network Design Sales, Marketing Input
What-if Analysis
5. Executive Management Orders/Demand Balancing
KPI Measurement
Consensus
Plan vs. Actual The Integrated Business
Waterfall Analysis Decision-making or
Root Cause Analysis
Planning Process (IBP) is
Continuous Improvement
both multi-functional and
multi-dimensional
4. Financial Planning
Product Line Profitability 3. Supply Planning
Constraint Management Capacity Planning
What-if Analysis Inventory Planning
Allocation of Demand to Supply Logistics
Analyze Revenue, Margin and Working Capital Impact Risk and Opportunity
Planning
Identify Gaps between S&OP and Strategic Goals
© 2011 End-to-End Analytics, LLC 6
7. Including Supply Management in the Process
Participation and Preparation
Participation - getting a “seat at the table”
Establish transparency to supply risks and opportunities
Engage proactively with other functions – understand their goals and
challenges within the integrated business planning context
Create supply management scenarios that will enable other functions
to meet their goals
Strive for mutual accountability
Preparation for Participation
Assess the risks
Build the analytical foundation for creating opportunities
Create scenarios to leverage opportunities
© 2011 End-to-End Analytics, LLC 7
8. Preparation for Participation
The Supply Management Funnel to IBP
Assess Build Leverage
Risks Foundation Opportunities
Integrated
Business
Supplier Viability Planning
Bargaining Position Develop Sourcing Collaborate
Strategy
Capacity &
Dependency Risk
Structure and Manage Contracts
$
Analyze Total Cost of
Ownership Purchase Strategically
Price Trends and
Exchange Rates
Following the process in the funnel enables the steps for participation
by supply management in the integrated business planning process.
© 2011 End-to-End Analytics, LLC 8
9. Preparation for Participation
Assess Supply Risks
Assess Build Leverage
Risks Foundation Opportunities
Integrated
Business
Supplier Viability Planning
Collaborate
Bargaining Position Develop Sourcing
Strategy
Capacity &
Structure and Manage Contracts
$
Dependency Risk Analyze Total Cost of
Ownership Purchase Strategically
Price Trends and
Exchange Rates
© 2011 End-to-End Analytics, LLC 9
10. Preparation for Participation
Assess Risk - Analyze Supplier Viability
Drivers of Viability
Balance sheet (working capital, debt)
Income statement (profitability)
Cash flow (sufficient, positive)
Breadth of customer base
Competitive threats
Technology
Will the supplier‟s technology become obsolete?
Will the supplier be able to support the next generation of your product?
Relative size – takeover target?
© 2011 End-to-End Analytics, LLC 10
11. Preparation for Participation
Assess Risk - Analyze Bargaining Position
Key Commodity, Component, Material or Service
Percent of Buyer‟s
Annual Purchase Least Leverage Some Parity; Key Opportunity for Innovative Supply;
(High) Detailed Knowledge of TCO is Important;
Integrated decisions for an organization should be informed by
bargaining position, which is a multi-faceted concept. This is one
example of a way to visualize bargaining position.
Percent of Buyer‟s
Annual Purchase
Least Important Quadrant Greatest Leverage Quadrant
(Low)
Size = Price (low, average, high)
Percent of Supplier‟s Business Percent of Supplier„s Business
Color = Overall Relative Bargaining Position (strong, moderate, weak)
(Smallest) (Largest)
© 2011 End-to-End Analytics, LLC 11
12. Preparation for Participation
Assess Risk – Supplier Capacity and Dependency
Commodity A Commodity B
Commodity A
10% Committed from Current, Approved
20%
Suppliers
35%
50% Additional Potential Commitment from
20% Current Suppiers
50%
10% Opportunity for Other Supply
5% 35%
50% Potential Risk to Supply
Commodity C Commodity D
0%
20% Systematically identify and
10% graphically depict where the
5%
capacity of your suppliers
20% 60% and broader capacity puts
100% supply at risk.
© 2011 End-to-End Analytics, LLC 12
13. Preparation for Participation
Assess Risk - Pricing Trends and Exchange Rates
Quantitatively know the risk
from purchase prices and
exchange rates where
applicable.
© 2011 End-to-End Analytics, LLC 13
14. Preparation for Participation
Build the Foundation for Potential Supply Opportunities
Assess Build Leverage
Risks Foundation Opportunities
Integrated
Business
Supplier Viability Planning
Collaborate
Bargaining Position Develop Sourcing
Strategy
Capacity Risk
Structure and Manage Contracts
$
Analyze Total Cost of
Ownership Purchase Strategically
Price Trends and
Exchange Rates
© 2011 End-to-End Analytics, LLC 14
15. Preparation for Participation
Build the Foundation for Opportunities – Sourcing Strategy
R&D, marketing, operations and sourcing decisions are
interdependent and need to be integrated
New product development must coordinate carefully with sourcing
New markets may require new sources
New manufacturing techniques may require sourcing changes
Demographics, service models and legal requirements must be
considered in sourcing strategies
Need to be able to consider internal vs. external sourcing and to what
degree and propose a plan that will support the business strategy for
maximum revenue growth, return on net assets, margins and market
share – objectives of S&OP/Integrated Business Planning
© 2011 End-to-End Analytics, LLC 15
16. Preparation for Participation
Build the Foundation for Opportunities – Analyze TCO
You need to understand both sides of the equation
Buyer Supplier
Price Price
Planning Time value of money (Payment terms)
Execution Commitment
Quality Expediting
Value added services Design changes
Taxes
Time value of money (financing/payment terms)
Cost of holding inventory
Understanding TCO and your sensitivity to it can lead to
innovative arrangements and profitable outsourcing
Price x for payment in 45 days
Price y - x for payment in 30 days
Outsourcing analysis
© 2011 End-to-End Analytics, LLC 16
17. Preparation for Participation
The Supply Management Funnel to IBP
Assess Build Leverage
Risks Foundation Opportunities
Integrated
Business
Supplier Viability Planning
Collaborate
Bargaining Position Develop Sourcing
Strategy
Capacity and
Structure and Manage Contracts
$
Dependency Risk Analyze Total Cost of
Ownership Purchase Strategically
Price Trends and
Exchange Rates
© 2011 End-to-End Analytics, LLC 17
18. Preparation for Participation
Leverage Opportunities – Collaboration Scenarios
Transactional Collaboration
Easily supported by technology
Automatic, systematic communication for larger, more important suppliers
Regular, manual communication and transactions for smaller suppliers
Beyond transactions, what can be done?
Co-investment on reducing changeovers
Offering long term commitment for frequent replenishments
Pickup vs. delivery
Parcel or less-than-truckload deliveries in exchange for ??
Other Areas of Potential Collaboration
Requirements (time-phased view into what you anticipate your needs will be)
Design (can be design of indirect materials as well – think marketing
materials, etc.)
Technology
© 2011 End-to-End Analytics, LLC 18
19. Preparation for Participation
Leverage Opportunities - Contract Structure & Management
Scenarios
In order to create a win-win scenario, you have to know the
following:
TCO
Your sensitivity to its components
How much money can be saved in total
How much you want to capture (or can afford to share as
leverage with your supplier)
How to structure the contract for maximum flexibility and
minimum risk (e.g. Vested Outsourcing)
© 2011 End-to-End Analytics, LLC 19
20. Supply Management Contributions – Opp.
Leverage Opportunities – Contract Structure & Management
Scenarios
Considerations for Flexibility and Risk
Potential range of future requirements by period
Minimum and maximum quantity in units for each period
Unit price by period, fixed or market dependent
Lead time commitment
Understanding regarding cancellation or changes to orders
Minimum and maximum quantities over a range of periods
Minimum order quantities
Sequential capacity expansion options, each of which might
have its own lead time and associated payment for expansion
cost
Other
© 2011 End-to-End Analytics, LLC 20
21. Preparation for Participation
Leverage Opportunities – Strategic Purchase Scenarios
Strategic Purchases
Requirements + Quantity Discount + Forecasted Price +
Inventory Holding Cost + Risk of Obsolescence
Normal
Material Price
Purchases
Dollars
Predictive and prescriptive analysis
Time
© 2011 End-to-End Analytics, LLC 21
22. Summary
Getting Started
Participation - getting a “seat at the table”
Establish transparency to supply risks and opportunities
Engage proactively with other functions – understand their goals and
challenges within the integrated business planning context
Create supply management scenarios that will enable other functions
to meet their goals
Strive for mutual accountability
Preparation for Participation
Assess the risks
Build the analytical foundation for creating opportunities
Create scenarios to leverage opportunities
© 2011 End-to-End Analytics, LLC 22
23. Supply Chain and Pricing Expertise Analytical Know-how
Arnold Mark Wells, CPIM
Principal
End-to-End Analytics, LLC
955 Alma St., Suite B
Palo Alto, CA 94310
330 546 2404
mark@e2eanalytics.com
Superior Supply Chain Performance Through Data-Driven Analysis
Powerful, Visual, Interactive Excel-based Tools
Also:
• mark@arnoldmarkwells.com
• http://arnoldmarkwells.wordpress.com
© 2011 End-to-End Analytics, LLC 23
Notas del editor Each function has its own goals and targets to hit. Many times, these are not aligned to deliver an overall greater value to shareholders. This may be a bit more obvious in the direct procurement space, but it is also true in indirect procurement for critical supplies. How can these many interdependent decisions within separate business functions be aligned? Certainly a risk can present an opportunity and an opportunity implies a risk (at least the risk of an opportunity cost). Other possible factors:Relative QualitySwitching Cost This is one visual way to present a potential area of risk for the business plan.Other possible factors:Contribution to innovationRelative QualityCollaboration and Automation Again, these could be indirect commodities, materials or services as well as direct. This can apply to both manufacturing and to service environments. In the indirect and non-manufacturing spaces, physical space and media space, paper, money (in banking for ATM’s), critical spare parts for manufacturing equipment and other similar purchased goods and services come to mind. Hopefully, you can quickly think of the relevant critical purchased goods or services in your industry and in your company. In recent months commodity prices have risen and fluctuated. This creates a risk to the costs for both direct and indirect procurement. Companies like SAP, Oracle and Ariba have created businesses or lines of business that are focused on facilitating transactional collaboration and execution, driving down procurement costs. If this is not in place for your largest and most critical suppliers, is there a good reason? Has the total cost of the opportunity been analyzed and is that part of the integrated decision dialog? Can the collaboration be extended to planning in a way that inventory and lead times can be reduced?